Private credit at a hedge fund
So I will be moving from a HF equities seat covering my sector to a private credit role (same sector) at a large, established fixed income HF where I’ve been told I’ll be investing across the capital structure. How might this sort of role compare to one at one of the traditional credit shops (Ares, Golub, etc.)?
I don’t know much about the credit world at all so don’t rly understand if there is a difference in work, comp, or overall desirability (quality of deal sourcing?) between these types of institutions. Thoughts appreciated!
Hey Analyst 1 in HF - EquityHedge, I'm the WSO Monkey Bot and I am sad to say, but this thread is lonely, so thought I'd post in here to try and help out. Some potential topics that might help:
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Hope that helps.
Bump :(
If i'm interpreting the question properly you're trying to compare private credit at a HF vs dedicated credit manager? Just my 2 cents, but if that's the case there might be a better way to think about the opportunity. HF is just a fee/legal structure but what actually impacts your day to day experience is size of the platform, the group's risk appetite, and product flexibility. Size of platform is self explanatory but there's a huge spectrum of private credit from vanilla senior direct lending for super well-covered companies to opportunistically investing in higher yielding more volatile and stressed companies. More risk = more return = have to do deeper diligence and build stronger conviction in the company.
Right, so how do I think about the overall experience of doing private credit of the more interesting variety (lower in the cap stack/opportunistic/possibly some distressed) at an established credit HF (just over $10bn AUM across all strategies) vs a credit manager with 100s of $bns, assuming similar mandate? I'm new to the credit space so not sure if there are meaningful differences in career outlook, comp, etc. HF obviously runs a lot leaner (just two other people on my team for this strategy) with lower AUM but not sure if that is a good or bad thing (AUM/head is perhaps higher but does this come at the cost of scale and sourcing capabilities?).
Assuming similar mandate it shouldn't matter much then but caveat that a big part of mandate is also check writing ability as it dictates investment sizes and very generally lower AUM = can't write big checks and will work with smaller companies (there are exceptions so def do your research). I guess another big consideration would be the firm culture. Certain firms have a tendency to comp higher because of where they traditionally source talent. Have seen some lean HFs that pay really well and also larger credit managers comp well (especially if they have a PE strat as they comp the same at the junior level), so really depends firm to firm at that point.
Has the team actually deployed money or is it a strategy build out? Quite a few credit hedge funds have tried to launch privates businesses to varying degrees of success, though mostly haven't scaled the way they like. Private credit is alot different from a liquidity / underwriting standpoint than liquid credit so usually is some growing pains at the firm level and alot of times its difficult to actually get $$$s out the door.
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